Frazer v National Mutual Life Association [2010] NSWSC 45 (18 March 2010)

Last Updated: 19 March 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Frazer v National Mutual Life Association [2010] NSWSC 45


JURISDICTION:


FILE NUMBER(S):
6368/2008

HEARING DATE(S):
22 - 24 February 2010

JUDGMENT DATE:
18 March 2010

PARTIES:
Brett Frazer (Plaintiff)
The National Mutual Life Association of Australasia (Defendant)

JUDGMENT OF:
Gzell J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
M Gollan (Plaintiff)
D Villa (Defendant)

SOLICITORS:
Firths (Plaintiff)
TurksLegal (Defendant)



CATCHWORDS:
INSURANCE - Accident and Sickness Insurance - whether the contract of insurance was made when an initial premium deposit was paid - whether contract of insurance made when plaintiff signed an acceptance of revised terms form including an explosives exception - whether the contract of insurance arose when the income protection policy issued - whether the plaintiff was in breach of his duty of disclosure - whether in answering a question in the application form the plaintiff made a misrepresentation to the defendant - whether the defendant was entitled to terminate the contract under the Insurance Contracts Act 1984 (Cth), s 29(3) on the basis that had the plaintiff complied with the duty of disclosure or the misrepresentation had not been made the defendant would not have been prepared to enter into the contract of insurance on any terms - whether the income protection policy was a contract of life insurance

LEGISLATION CITED:
Insurance Contracts Act 1984 (Cth)
Life Insurance Act 1995 (Cth)


CASES CITED:
Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1939) 39 SR (NSW) 174

TEXTS CITED:


DECISION:
Defendant had validly terminated the contract of insurance.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


GZELL J

18 MARCH 2010

06368/2008 BRETT FRAZER v THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LTD

JUDGMENT

1 The Plaintiff, Brett Frazer, took out an income protection policy with the Defendant, The National Mutual Life Association of Australasia Ltd.

2 It is not in issue that Mr Frazer was totally disabled by reason of depression from 22 February 2008 to 27 November 2009 and, in the absence of the termination of the policy by NMLA, Mr Frazer would have been entitled to fortnightly benefits at the rate of $6250 per month from 22 May 2008 to 27 November 2009. There was a 90 day deferral period under the policy.

The pleadings

3 NMLA claims that Mr Fraser answered two questions in the proposal form in the negative and those answers were false and it was entitled to terminate the policy.

4 Mr Frazer claims that he had a reasonable belief that the answers he gave were true and those statements are not to be taken as misrepresentations in terms of the Insurance Contracts Act 1984 (Cth), s 26.

5 NMLA claims that Mr Fraser also failed to disclose matters relevant to its decision whether or not to issue the policy. NMLA claims it was entitled to terminate the policy for this reason as well, which it claims to have done by service of its defence.

6 In the alternative, NMLA claims that if the policy is enforceable, Mr Frazer is not entitled to benefit under it in terms of cl 37 because his depression existed before its commencement.

7 Mr Frazer claimed that he was not informed of cl 37, that for NMLA to rely upon it would be for it to fail to act with the utmost good faith and, pursuant to the Insurance Contracts Act, s 14, NMLA could not rely upon the provision. Mr Frazer abandoned this ground during final address.

Policy commencement date

8 Mr Villa, who appeared for NMLA, submitted that there was a presumption in the case of life insurance that all communications before the execution of a policy are preliminary only and there is no binding contract until a policy issues. In this case the policy issued on 11 January 2008. Mr Villa relied on Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1939) 39 SR (NSW) 174 at 186. Jordon CJ and Nicholas J who constituted the majority of the Court of Appeal said:

“It has been said that in life assurance there is a strong presumption that all communications before the execution of the policy are preliminary only, and that the parties negotiate upon the footing that there shall be no binding contract until the first premium is paid and the policy issued.”

9 But as Mr Gollan, who appeared for Mr Frazer, pointed out, immediately preceding that passage their Honours said that the question whether upon payment of the premium by the proponent a contract of assurance comes into existence before the issue of the policy by the assurer, must necessarily depend upon the facts of each particular case.

10 That was a reinsurance case in which the insured’s proposal and declarations constituted part of the reinsurance contracts. The insurer claimed to have insured the proponent by the oral acceptance by its managing director of a written proposal. A jury found that the plaintiff had done so. The majority of the Court of Appeal held there was sufficient evidence to justify that finding.

11 In the instant case, Mr Frazer signed an authority to charge his MasterCard for premiums on 10 December 2007. An initial premium was deducted on 12 December 2007.

12 Stacey Sykes was the agent of NMLA who completed and lodged Mr Frazer’s application form on 11 December 2007. He was later advised by NMLA that because Mr Frazer worked with explosives, NMLA would require an explosives exclusion. Mr Sykes arranged to meet Mr Frazer in the car park at his work place where Mr Frazer signed an explosives exclusion headed: “Acceptance of revised terms form” and stated a policy number. That document was signed on 21 December 2007 and returned to Mr Sykes’ office immediately before his leaving on holidays. The document was not received by NMLA until 8 January 2008.

13 Mr Gollan submitted that the contract commenced when the first premium was deducted on 12 December 2007 or, in the alternative, on 21 December 2007 when Mr Frazer accepted the explosives exclusion. It was submitted that the policy number on the revised terms form was the same as the number on the policy when it issued and that together with a revision of terms suggested there was a policy on foot prior to 21 December 2007.

14 The insurance schedule specified 11 January 2008 as the policy commencement date and it specified a waiting period of 90 days.

15 I do not regard the specification of a policy number, a policy owner and a life insured on the acceptance of revised terms form as significant. No doubt for its purposes an insurer will ascribe a number, an owner and a life insured to an application form which are continued as the policy number, policy owner and life insured should the insurer accept the insured’s application.

16 The Product Disclosure Statements for the income protection policy stated that interim insurance cover was available. The disclosure statement was:

“To give you some protection while we are assessing your Application, we provide interim insurance cover to you for total disability caused by an injury or sickness. This cover does not apply where your waiting period is 90 days or more, nor does it cover you for any benefit besides total disability caused by an injury or sickness. Conditions apply. For details see page 85 of this Product Disclosure Statement.”

17 At the specified page the exclusion of interim cover where a waiting period “proposed for” was 90 days or more was stated. It was stated that interim cover commenced on the date the application form and first premium payment or an effective deduction authority for that amount was received. The duration of the interim cover was stated to be the earliest of the date on which the insured was notified of the assessment decision in relation to the application; the date of withdrawal of the proposal by the insured; or 45 days after the cover started.

18 While the policy stipulated a waiting period of 90 days, Mr Frazer’s application sought a period of 60 days.

19 It was submitted that the payment of the premium entitled Mr Frazer to interim insurance cover and did not evidence the commencement of the policy itself.

20 I reject that submission. The Product Disclosure Statement stated that the insurer: “grants interim income insurance Cover...without any extra premium being charged...”

21 It was submitted that there was no interim income insurance because the waiting period under the policy was 90 days. But the proposal had elected a waiting period of 60 days and the exclusion related to the waiting period proposed rather than the waiting period stated in the policy.

22 I do not regard the existence or non-existence of interim income insurance as of significance in determining when a contract of insurance came into existence.

23 I do not regard the authority to charge a credit card as evidence of a concluded contract of insurance. The authority to charge the account is but part of the proposal put forward by the assured and unless and until the proposal is accepted and the insurer issues a policy, there is no concluded contract.

24 Nor do I regard the making of a charge against Mr Frazer’s MasterCard as evidence of a concluded contract. There was a statement in the application form that a deposit premium was required and could be paid by cheque or credit card. In my view the initial charge to Mr Frazer’s credit card was in the nature of a deposit and not the payment of a premium under an existing policy.

25 In my view, Mr Frazer made an offer that the insurer charge his credit card with an initial deposit and subsequent premiums. The insurer availed itself of that offer with respect to a deposit premium before it issued its policy. But that did not, in my view, prevent the insurer conducting its usual examinations to determine whether it would accept Mr Frazer’s application.

26 The logical progression towards the issue of a policy of insurance is for the proposed insured to lodge an application form, which is considered on behalf of the insurer. In the course of that consideration, as in this case, the insurer may not be prepared to issue a policy unless there be an exclusion.

27 In forwarding the acceptance of revised terms form, NMLA was offering to consider Mr Frazer’s application on the basis that it provided for no payment for any disability contributed to or caused by participation in any activity involving the use of explosives. It was an offer to consider a revised proposal from Mr Frazer open for 30 days. NMLA was still in the process of considering whether it would issue a policy to Mr Frazer.

28 If the policy had commenced when Mr Frazer authorised charges to his MasterCard account or when the first charge was made to it, there would have been no point to the acceptance of revised terms because Mr Frazer would already have been covered for disability caused or contributed to by participation in the use of explosives.

29 In my view the insurance commenced when Mr Frazer’s revised offer was accepted by the issue of the policy on 11 January 2008. I reject the submissions that the contract was concluded with the payment of the initial deposit premium on 12 December 2007 or that it commenced when Mr Frazer accepted the explosives exclusion and signed the revised terms form on 21 December 2007.

30 This analysis is supported by the statement in the Product Disclosure Statements that in some instances it may be necessary to obtain further medical or financial information before an application is finalised and the statement that once the insurer has processed and accepted the application and first premium the insured will be sent a plan document setting out the terms and conditions of the plan and a plan schedule outlining the regular premiums and the cover chosen.

Non-disclosures - Blood

31 Mr Frazer saw Dr Debelak on 11 December 2007. The doctor recorded that he had occasional bright red blood in faeces and his brother had bowel cancer. The doctor gave Mr Frazer a letter of referral to Dr Draganic.

32 Dr Draganic saw Mr Frazer in February 2008. Dr Draganic recorded that he had recently operated on Mr Frazer’s brother for rectal cancer and that Mr Frazer himself had noticed rectal bleeding of late in the stool on three or four occasions since the new year. He had no altered bowel habit or other symptoms. Dr Draganic reported that Mr Frazer required a colonoscopy that he had arranged to take place on 13 March 2008. On that date Dr Draganic reported that a small polyp was snare excised and sent for pathology. On 21 March 2008 Dr Draganic reported that the polyp was benign.

33 Dr Lewin provided a report for the purpose of these proceedings. He put Mr Frazer’s concern that he might have colon cancer in June 2007. That was clearly incorrect. Mr Frazer’s brother had not then been diagnosed with cancer.

34 In his affidavit, Mr Frazer said that if asked he would have told Mr Sykes that he had recently noticed some blood in his faeces. But in cross-examination he said that after reading the medical evidence he saw that the doctors had recorded blood in his faeces but he had explained to the doctors that he had blood on the toilet paper and he told his solicitors he had blood in his faeces after reading the medical reports.

35 I do not accept Mr Frazer’s evidence that all he told the doctors was that he noticed blood on toilet paper. The doctors would not consistently misstate what they were told. What he told his solicitors and what they included in his affidavit was the truth.

36 There is another significant respect in which Mr Frazer’s evidence differs from that of the doctors. It was put to him in cross-examination that he knew it was possible that he had bowel cancer because his brother had been diagnosed with cancer, he understood it was hereditary in some cases and he had been experiencing blood, as he put it, on the toilet paper. He denied this proposition. He said he did not believe he had bowel cancer. He just wanted to get it checked out.

37 Yet Dr Lewin recorded his concern about the possibility of colon cancer heightened by the fact that his brother was diagnosed with bowel cancer. And Dr Robert Hampshire who saw Mr Frazer for the purpose of these proceedings recorded that he was extremely agitated when his brother developed bowel cancer. That prompted him to really take stock of his own life, his own vulnerabilities, and it was with a troubling sense of fallibility that he sought an insurance policy.

38 I do not accept the only symptom of which Mr Frazer was aware was blood on toilet paper and that he told his solicitors he had blood in his faeces only because he read that in the medical reports.

39 I find that Mr Frazer’s condition was as the doctors recorded him telling them and, far from just wanting to have his condition checked out, I find that Mr Frazer was concerned when he went to see Dr Develak on 11 December 2007 that he had blood in his faeces from about June 2007 and he was concerned that he might have cancer.

40 While Mr Frazer initially maintained that he went to Dr Develak for other reasons, he ultimately conceded in cross-examination that he went to see him because there was blood on the toilet paper. Mr Frazer accepted that if he had bowel cancer that would be something that would be relevant to NMLA’s decision.

41 Mr Frazer had a continuing obligation before NMLA entered into the policy to inform NMLA of any matter he knew, or a reasonable person in the circumstances could be expected to know, to be a matter relevant to NMLA’s decision whether or not to grant a policy to him and on what terms under the Insurance Contracts Act, s 21.

42 Mr Frazer did not reveal that he had blood in his faeces or that he had blood on toilet paper or that he feared he might have cancer when Mr Sykes filled out, and Mr Frazer signed, his application form on 10 December 2007.

43 I find that Mr Frazer knew, or at the least a reasonable person in the circumstances could be expected to know, that those matters were relevant to the decision of NMLA whether to issue a policy to Mr Frazer and on what terms.

44 It was submitted that Mr Frazer had failed to inform NMLA of his appointment for a colonoscopy. But the appointment for a colonoscopy in March 2008 was not made until February 2008 when Mr Frazer saw Dr Draganic. It was well after the issue of the policy and is irrelevant for present purposes.

45 After he had seen Dr Debelak on 11 December 2007, Mr Frazer failed to inform NMLA that he had been referred to Dr Draganic, a colorectal surgeon.

46 That might also have constituted a breach of Mr Frazer’s duty of disclosure, but it was not relied upon and I make no finding with respect to it.

Non-disclosures - depression

47 Mr Frazer consulted Dr Sanders for anxiety on 29 August 2005 and was prescribed valium. Mr Frazer’s grandmother had been killed in a motor vehicle accident and he was concerned about giving the eulogy at her funeral. The incident is not indicative of the depression that totally disabled him from February 2008.

48 On 28 June 2007 Mr Frazer saw Dr Debelak. He recorded in his clinical notes that Mr Frazer was suffering from depression; that he had been married for 14 years; that he had three children; that his wife was leaving him; that she did not love him; and that his mind was not on the job. Dr Debelak did not prescribe any medication and asked Mr Frazer to return in one week.

49 Mr Frazer returned on 6 July 2007 when Dr Debelak recorded that he went away for a week; that his wife left and took lots of things from the house; that he issued Mr Frazer with a work certificate for the next week; that Mr Frazer was sad; that he did not want treatment; that he would see Dr Sanders next time. Dr Debelak noted that Mr Frazer should be reviewed in one week’s time and that he should keep his job.

50 Dr Debelak said that these clinical notes suggested to him that he had diagnosed Mr Frazer at the time as suffering from reactive depression as opposed to endogenous depression. His life at that stage was in Dr Debelak’s word “horrible.”

51 Dr Sanders saw Mr Frazer on 13 August 2007 when he described his marriage break up and his suggestion to his wife that they seek marriage guidance counselling which she refused.

52 Dr Debelak saw Mr Frazer again on 11 December 2007 when he recorded poor sleep and a bad split up. He prescribed Temaze and Mogadon to help Mr Frazer sleep.

53 On 4 January 2008, Mr Frazer saw Dr Sanders. He complained that he was depressed; that his wife had left him for someone else; that he had a mortgage and debts and no car; that his wife had taken the car; that he was paying maintenance for the children that his wife took as well. Dr Sanders noted that Mr Frazer was suffering from major depression. He swapped the medication prescribed by Dr Debelak with the anti-depressant Avanza.

54 Dr Sanders said that the diagnosis of major depression requiring medical intervention was not made until 4 January 2008 at which time Mr Frazer’s symptoms were not of sadness or feeling anxious with insomnia, but of a major depressive illness and an inability to cope with life and work.

55 It was submitted that Dr Debelak’s initial suggestion of depression was something that could be interchanged with his next entry of sadness and that, as Dr Sanders had said, Mr Frazer was not diagnosed with depression until 4 January 2008. On that occasion Dr Sanders recorded the onset of symptoms at 28 December 2007. It was about this time that Mr Frazer said he was informed that his wife had had an affair.

56 In light of my findings that the contract of insurance came into existence on 11 January 2008, it is unnecessary for me to determine whether Mr Frazer was suffering from depression in June 2007 or in July 2007 when he saw Dr Debelak. It is also unnecessary because, as will appear, NMLA would have entered into an income protection policy with Mr Frazer if it had been informed of these consultations but subject to a nervous disorder exclusion.

57 It is not in issue that Mr Fraser was suffering from a major depressive illness on 4 January 2008 and that he did not advise NMLA of that fact. I find accordingly.

58 I also find that Mr Frazer knew, or at the least a reasonable person in the circumstances could be expected to know, that the consultation with Dr Sanders on 4 January 2008 raised matters that were relevant to the decision of NMLA whether to issue a policy to Mr Frazer and on what terms.

Misrepresentations

59 The application form contained at Q 12 a series of questions about personal health history with boxes “yes” and “no”. Each of the “no” boxes in Q 12 was marked by Mr Sykes.

60 Mr Sykes said it was his usual practice to read each such question to an applicant and obtain his answer. He said that was what he did on this occasion.

61 Mr Frazer said he was asked some questions but he could not recall what they were. But he did recall being asked whether he had suffered from mental illness, depression, anxiety, a nervous condition or stress. Those were the earlier items in Q 12(h). Mr Frazer said he told Mr Sykes about being prescribed valium after his grandmother died. Mr Frazer said that Mr Sykes’ response was that that was more than five years earlier and he need not worry. But it was not five years earlier and Q 12 was not limited to the previous five years. It asked: “At any time in your life have you ever suffered from, received advice for, or experienced symptoms of the following” and it then itemised particular matters in paragraphs Q 12(a) to Q 12(w).

62 Mr Frazer said that if he had been asked the question whether he had suffered from disorder of the kidney, bladder or prostate, or had a urinary complaint or kidney stone in Q 12(f) he would have mentioned blood on the toilet paper. One would hardly expect those disorders to cause rectal bleeding.

63 Q 12(l) asked whether Mr Frazer had ever experienced symptoms of bowel disorder or irritable bowel syndrome. It was submitted that there was some ambiguity about this question because it might be confined to the bowel and exclude the anus or rectum. But as I have found that Mr Frazer had experienced blood in his faeces there was every indication to him that he might be suffering a bowel disorder and his failure to have Mr Sykes mark the “yes” box was a breach of Mr Frazer’s duty of disclosure under the Insurance Contracts Act, s 21 and a misrepresentation. As I have said, the possibility of bowel cancer was a matter relevant to NMLA’s decision whether to issue a policy and on what terms.

64 It was submitted that I should reject Mr Sykes’ evidence. But Mr Frazer conceded that Mr Sykes had asked him questions about his personal health history and he identified Q 12(h) as a question that he had been asked. He could not remember any other questions. It seems to me that there is no reason why, in those circumstances, I should not accept the evidence of Mr Sykes, and I do.

65 Mr Frazer relied upon the Insurance Contracts Act, s 26(1). It was in the following terms:

“Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation.”

66 There was no evidence from Mr Frazer that he answered Q 12(l), let alone any belief he had in the answer. In any event a reasonable person in the circumstances would not have held the belief that Mr Frazer has not suffered a bowel disorder. I reject the calling in aid of the Insurance Contracts Act, s 26(1).

67 It is unnecessary for me to determine whether the negative answer to Q 12(h) with respect to mental illness was a misrepresentation. It would be if Mr Frazer was suffering from depression on 28 June 2007 or 6 July 2007 when Dr Debelak saw him.

68 For the reasons stated above, any question of depression on those dates was overtaken by the diagnosis of Dr Sanders on 4 January 2008 and NMLA would have issued a policy subject to an exclusion had it known of the two earlier consultations.

Termination of the contract

69 It is not every failure of disclosure or misrepresentation that entitles an insurer to avoid a contract of insurance. So far as a life policy is concerned, the Insurance Contracts Act, s 29 limits the circumstances in which the failure of an insured to comply with the duty of disclosure or the making of a misrepresentation to the insurer entitles it to terminate the contract. Section 29(1) was in the following terms:

“This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into:

(a) failed to comply with the duty of disclosure; or

(b) made a misrepresentation to the insurer before the contract was entered into;

but does not apply where:

(c) the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or

(d) the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds.”

70 In this case NMLA relies upon the Insurance Contracts Act, s 29(3) which was in the following terms:

“If the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made, the insurer may, within 3 years after the contract was entered into, avoid the contract.”

71 The income protection policy in question was a contract of life insurance for the purpose of the Insurance Contracts Act, s 29 for the following reasons.

72 The Insurance Contracts Act, s 11(1) defined a contract of life insurance as one that constituted a life policy under the Life Insurance Act 1995 (Cth). A life policy is defined under s 9 of that Act to include a continuous disability policy. That term is defined in s 9A(1) to include a contract of insurance that by its terms was to be of more than three years’ duration and under which a benefit was payable in the event of injury to, or disability of, the insured as a result of accident or sickness.

73 The insurance schedule to the policy in question nominated a commencement date of 11 January 2008 and an expiry date of 28 February 2033.

74 The policy in question is therefore within the ambit of the Insurance Contracts Act, s 29.

75 The defence was signed on 28 April 2009 and filed the next day. The purported termination was, in consequence, within the three year period prescribed by the Insurance Contracts Act, s 29(3).

76 The question is whether the failure to disclose the depression was sufficient to justify termination by the defence.

77 The underwriter who made the decision that the policy should issue had left the employment of NMLA. Evidence was tendered, on my ruling over objection, from Jacqueline Flack, a senior underwriter and non-disclosure consultant employed by NMLA. She said that if Mr Frazer had disclosed his consultation with Dr Sanders on 4 January 2008 and his diagnosis of major depression and his prescription of the antidepressant Avanza, NMLA would have declined to insure Mr Frazer against loss of income due to injury or illness on any terms.

78 On the other hand, Ms Flack said that had the consultations on 29 August 2005, 28 June 2007 and 6 July 2007 been disclosed to NMLA, it would have applied a nervous disorder exclusion on any offer of income insurance cover to Mr Frazer.

79 Ms Flack’s conclusion that had NMLA been advised of the attendance on Dr Sanders on 4 January 2008 it would have declined to insure Mr Frazer on any terms was not seriously challenged. She rejected the suggestion that NMLA would have written insurance but subject to an exclusion. There is no reason why I should not accept her evidence, which I do.

80 It follows that, in my view, NMLA has made out its entitlement to terminate the contract of insurance as it did upon the issue of its defence.

81 If I be wrong in my view that the contract of insurance came into existence on 11 January 2008 and it came into existence on 21 December 2007 when Mr Frazer signed the acceptance of revised terms form, Ms Flack said that had Mr Frazer disclosed to NMLA that he had been referred on 11 December 2007 to Dr Draganic for further investigation of blood in his faeces, NMLA would have declined the application pending the outcome of Dr Draganic’s investigations.

82 The results of the colonoscopy were reported on 21 March 2008. In that period of suspension, the onset of the major depressive illness diagnosed on 4 January 2008 arose and, again, Mr Frazer’s failure to inform NMLA of this condition triggered NMLA’s entitlement to rely on the Insurance Contract Act, s 29(3).

83 If I be wrong in my view that there was blood in Mr Frazer’s faeces and the only blood was on the toilet paper the position is unaltered. Ms Flack in cross-examination maintained that the suspension of the policy process that resulted from the misrepresentation in Q 12(l) that there was no bowel disorder, the failure to disclose blood in faeces and Dr Debelak’s referral of Mr Frazer to Dr Draganic would have applied equally if blood was only on the toilet paper. Ms Flack said any client who had any type of symptoms like blood on paper meant that NMLA did not know what the outcome of the investigation would produce and they had no choice but to suspend the process.

Pre-existing condition

84 NMLA’s alternative defence that the provision in the contract excluding benefit if a pre-existing condition existed applied to Mr Frazer, only arises if the contract is still on foot and I have found that it was validly terminated.

85 Clause 37 of the policy commenced as follows:

“We won’t pay a benefit for a medical condition that occurred before the Commencement date unless you or the person insured told us in writing about the medical condition when you or he or she applied for the plan or applied to have the plan increased or restored under clause 50, and we agreed to accept it.”

86 Mr Frazer relied upon the definition of a medical condition or illness in cl 37. It was in the following terms:

“For the purposes of this clause, the person insured had a medical condition or illness if:

a ‘medical practitioner’ or ‘other health professional’ gave the person insured, or recommended that he or she receive advice, care or treatment; or

the person insured had symptoms of a medical condition or illness for which a reasonable person would have tried to receive advice, care or treatment from a ‘medical practitioner’ or ‘other health professional’.”

87 It was submitted that Mr Frazer did not receive advice, care or treatment on 28 June 2007 or 6 July 2007. But if the contract did not commence until 11 January 2008, as I have found, Mr Frazer clearly received care or treatment from Dr Sanders on 4 January 2008.

88 Had it been necessary for me to determine this issue I would have rejected the submission that cl 37 of the policy did not apply.

Orders

89 I have been asked by the parties not to enter any orders because, depending upon my reasons, different consequences might follow. For example, the Insurance Contracts Act, s 29(4) provides for a variation of a sum insured if an insurer has not avoided the contract of insurance.

90 I will therefore hear the parties on the appropriate terms of orders and I will hear the parties on costs.

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LAST UPDATED:
18 March 2010